Bremer v. Columbian National Life Insurance

Braley, J. In Bremer v. Hadley, 196 Mass. 217, the authority of the trustee either to sell the property held in trust under the will of Francis W. Sayles, or to change the investments, was carefully considered. Because of the language used by the tes [350] tator, it was held that the trustee was not empowered to convert the estate from one form of security into another, unless authorized by decree under the provisions of R. L. c. 147, § 15, as amended by the St. of 1907, c. 262, § 1. The plaintiff claims that the present case is governed by that decision. Before deciding the question, it becomes requisite to ascertain the substantially undisputed facts involved in the transaction which the bill asks to have set aside. The plaintiff’s predecessor, Berry, found among the investments made by a former trustee a promissory note secured by a mortgage of real estate given by one Arnold. When Berry succeeded to the trusteeship, the note was overdue, but the interest continued to be paid regularly for nearly six years after maturity by Julia Friedberg, the surviving owner of the equity of redemption, who with her husband had acquired title as tenant by the entirety shortly after the mortgage was given. The trustee having demanded payment of the principal, she applied to the defendant for a loan to enable her to take up the mortgage. But, while the application was granted, an examination of the title disclosed that a second mortgage had been given, which was still outstanding. To avoid any question as to priority of title which might arise if the first mortgage was discharged, when the parties met to pass the papers, the trustee without any previous arrangement between himself and the defendant, upon receiving payment, executed and delivered an assignment, instead of a discharge, accompanied with a transfer of the note without recourse. The mortgage thereupon was extended for a period of five years, under an agreement by which Mrs. Friedberg became personally bound to the defendant to pay the debt. During the negotiations, there does not appear to have been any proposition from either the trustee or the company, that he should sell and it should buy the mortgage, but the object which the borrower and lender mutually sought to accomplish was this: An amount sufficient to take up the outstanding mortgage after the partial payment had been made was to be lent by the defendant upon the distinct understanding that the loan was to be secured by a mortgage upon her real estate. When, however, the condition of the title had been ascertained, as a matter of precaution on the part of counsel entrusted with the conveyancing, and under their advice, the old mortgage was [351] assigned with an agreement of extensionj instead of being discharged, and a new mortgage taken. It is evident that the trustee was not in the market seeking for an opportunity to change an investment, but was insisting upon the payment of a debt long overdue. If it turned out that, to raise the money his debtor must remortgage the property, and the defendant was willing to accept this security and make the necessary advancement, the transaction still remained essentially one where an old debt was liquidated with funds obtained from a new loan. The note, to which the mortgage was merely accessory, having matured, it became convertible into money according to its tenor, and, if not paid, suit could have been brought or the mortgage could have been foreclosed, as the duty devolved upon the trustee to protect the estate from loss. If, to obviate this expense and the chance of a failure to collect, or to realize a sum sufficient to pay the debt with the costs of foreclosure, he had received the principal in bank notes, and discharged, or, if equally advantageous to the trust, assigned the mortgage, it would be going far to say that the payment or the transfer was a nullity because the trustee was not authorized to convert the indebtedness into money. In its administration there undoubtedly must be a strict conformity with the directions found in a testamentary trust. But the words of the testator, that the trustee shall “ stand and be possessed ” of the trust estate, and “ pay all the net income and produce of the same ” to the beneficiaries for life, should not be enlarged beyond the construction put upon them in Bremer v. Hadley, ubi supra. It may be reasonably supposed that, if in the administration of the trust it became desirable or essential to close an investment, which by its terms had become payable, the testator did not intend that the trustee should be prohibited from receiving the proceeds and giving an acquittance in settlement, without first obtaining the sanction of the court. The general directions which he gave carry with them, by implication, the employment by the trustee of all reasonable and proper means by which they could be made effective, not only to preserve the estate as he left it, but to produce an income for the support of the beneficiaries for life. The acts of Berry, being commensurate with the purposes of the trust, were within his fiduciary authority, and the defendant acquired an indefeasible [352] title to the note and accompanying mortgage. Goodrich v. Proctor, 1 Gray, 567, 570. Manaban v. Varnum, 11 Gray, 405. We are of opinion that, upon the evidence, for the reasons stated, the decree for the plaintiff must be reversed, and a decree entered dismissing the bill with costs. Poland v. Beal, 192 Mass. 559, 561. Harvey-Watts Co. v. Worcester Umbrella Co. 193 Mass. 138, 143. Ordered accordingly.